ATO Clarifies Related Party Temporary Waiver of Rent

The ATO has clarified the situation where an SMSF owns real property and has been requested by a related party tenant for a reduction in rent because of the financial impacts of the COVID-19.

Charging a related party a price that is less than market value is usually a contravention.

Given the financial impact of COVID-19, will the ATO take compliance action if this occurs?

Commentary

Where landlords are giving their tenants a rent reduction or waiver because of the financial impacts of the COVID-19, the ATO’s compliance approach for the 2019–20 and 2020–21 financial years is that they will not take action where an SMSF gives a tenant – who is also a related party – a temporary rent reduction or waiver during this period.

Where there are temporary changes to the terms of the lease agreement in response to COVID-19 it is important that the parties to the agreement document the changes and the reasons for the change.

SMSF Auditors will require a signed minute or a renewed lease agreement for the 2020 audit.